Market update - 23 June

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The Independent Online

The FTSE 100 was up 29.9 points at 5650.7 at 11.18am on Monday. Oil companies were strong as the price of crude remained firm following the meeting of major producer and consumer nations in Jeddah, Saudi Arabia, yesterday - BG climbed by 18p to 1249p and Cairn Energy was up 19p at 3165p.

The banks, on the other hand, remained weak. HBOS slipped below its 275p rights issue offer price, down 3.28 per cent or 9.25p at 273p – Britain's biggest mortgage lender was hurt by the Rightmove housing survey, which was released this morning and showed that the average asking price for a home fell by 1.2 per cent during the past month.

Also, the Harbinger Capital Partners Master Fund declared a 3.29 per cent short position in HBOS this morning - under new FSA rules, companies with shorts in stocks undergoing rights issues must declare their positions, if the amount of stock shorted exceeds 0.25 per cent of the company's undiluted (pre-rights) shares in issue.

FTSE 250-listed Bradford & Bingley was also down, losing 0.75p to 67.75p after Odey Asset Management revealed a 0.28 per cent short position in the bank's shares.

Elsewhere in the banking sector, Lloyds TSB was down 5p at 322.5p as analysts weighed-in on reports that it was eyeing Dresdner Bank.

"Talk of a German acquisition is preliminary, with few prospects for synergies in our view," said Panmure Gordon, which reduced its target price for the stock to 350p from 410p, citing the "the rapidly deteriorating UK macro outlook".

Moving up

Pharmaceuticals group Shire was up 6.78 per cent or 54p at 851p, at first place on the leader board, after Goldman Sachs revised its rating on the stock to "buy" from "neutral".

Catering group Compass was up 6.5p at 364.75p after Societe Generale initiated coverage on the stock with a "buy" rating.

"In the current environment of rampant food inflation we estimate Compass is better positioned to continue to deliver cost efficiencies," the broker said, adding:

"This does not necessarily mean Compass is the better run business, but rather that it still has further to go in terms of turnaround and cost savings after many years of questionable management which resulted in far too much focus on top-line growth at the expense of profitability."

On the FTSE 250, JKX Oil & Gas was up 10.25p at 457p after Goldman Sachs moved the stock to "buy" and said:

"Historically JKX Oil and Gas has been the predominant way to invest in the Ukrainian gas sector, in our opinion. However, since April 2008 the reinvigoration of the Regal Petroleum story and the IPO of Cadogan Petroleum has left JKX somewhat in the shade. We now believe the stock offers significant opportunity, through a combination of compelling valuation, operational catalysts across 3Q08 and potential for upside risk to our current forecast of 2009E Ukrainian gas prices."

Moving down

A bearish note from HSBC bore on UK real estate investment trusts.

"We believe that it is too early to look through the downturn with the market pricing in average portfolio falls of 14% while our forecast is for an average 23% portfolio fall," the broker said, adding:

"We downgrade Land Securities to Underweight from Neutral and reiterate our Underweight ratings on the rest of our UK coverage. We reduce our target prices on Liberty Intl to 565p from 680p, Hammerson to 610p from 700p, British Land to 715p from 800p, SEGRO to 325p from 425p, Brixton to 210p from 255p and Land Securities to 1195p from 1500p."

Investors heeded the broker's advice and Land Securities was down 62p at 1277p, Brixton lost 7.75p to 252.5p, British Land was down 16p at 750p, Liberty International lost 24p to 880.5p, Hammerson was down 13p at 903p and Segro shed 22.25p to 372.75p.

Also on the downside, Debenhams remained weak, down 1p at 43p, as the market continued to worry about the company's debt position.